Description of your 2016 10K trust:
The BP Prudhoe Bay Royalty Trust (the "Trust") was formed as a Delaware Business Trust by the BP Prudhoe Bay Royalty Trust Agreement dated February 28, 1989 (the "Trust Agreement") between The Standard Oil Company ("Standard Oil"). , BP Exploration (Alaska) Inc. (“BP Alaska”), The Bank of New York Mellon (formerly The Bank of New York) as Trustee and F. James Hutchinson, Co-Trustee (formerly BNY Mellon Trust of Delaware). named as The Bank of New York (Delaware), Successor Co-Trustee). BP Alaska and Standard Oil are wholly owned subsidiaries of BP p.l.c. (“BP”).
Effective December 15, 2010, The Bank of New York Mellon ("BNYM") resigned as trustee under the Trust Deed and BP Alaska named The Bank of New York Mellon Trust Company, N.A. (the “Trust Company”) succeeding BNYM. as Trustee The Trust Company accepted his appointment and assumed all right, title, duty, power and authority previously held and exercised by BNYM under the Trust Deed. The Corporate Trust Office of the Trust (hereinafter referred to as the “Trustee”), where the affairs of the Trust are administered, is located at 601 Travis Street, 16th Floor, Houston, Texas 77002 and its number The telephone number at that address is ( 713) 483-6020.
The Trust electronically files annual reports on Form 10-K, quarterly reports on Form 10-Q and, when certain events so require, current reports on Form 8-K with the Securities and Exchange Commission ("SEC"). The public may read and copy all materials filed with the SEC by the Trust at the SEC Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public can obtain information regarding the operation of the Public Reference Room by calling the SEC. at 1-800-SEC-0330. The SEC also maintains a website that contains reports, proxy and information statements and other information about issuers (including the Trust) that are filed electronically with the SEC. The SEC's website address is http://www.sec.gov.
The Trust does not maintain an Internet website, but certain information regarding the Trust and the Trust Interests is available on the BusinessWire website at http://bpt.investorhq.businesswire.com. The Trustee will provide hard copy or electronic copies of the Trust's Form 10-K, Form 10-Q and Form 8-K reports and any amendments to such reports, free of charge upon request, as soon as reasonably practicable after the Trust presents them prior to the second. Copies of the reports may be requested by mail to: The Bank of New York Mellon Trust Company, N.A., 601 Travis Street, Floor 16, Houston, TX 77002, Attn: Global Corporate Trust - Corporate Finance; by calling: (713)483-6020; or by email to: elaina.c.rodgers@bnymellon.com.
Information in this report relating to the Prudhoe Bay Unit, the calculation of royalties and certain other matters has been provided to the Trustee of BP Alaska.
Employees
The Trust has no employees. All administrative functions of the trust are performed by the trustee.
The term "barrel" is a unit of measure for petroleum liquids equal to 42 US gallons corrected for a temperature of 60 degrees Fahrenheit.
Duties and Powers of the Trustee
The duties of the trustee are set forth in the trust deed and the laws of the State of Delaware. BNY Mellon Trust of Delaware has been appointed as a co-trustee to satisfy the requirements of the Delaware Statutory Trust Law that the trust have at least one trustee who is a resident or has their principal place of business in Delaware. The Bank of New York Mellon Trust Company, N.A. is the only one who can exercise the rights and powers granted to the trustee in the trust deed. A copy of the Trust Deed will be filed with the SEC as an attachment to this report.
The basic function of the trustee is to collect income from royalties, to pay all of the trust's expenses, fees and obligations out of the trust's income and assets, and to pay available cash to unitholders. Due to the passive nature of the Trust's assets and the limitations on the Trustee's power to incur obligations, the only liabilities normally incurred by the Trust in the conduct of its business are the Trustee's fees and routine administrative expenses, including accounting, legal and Administrative expenses . other professional fees.
The Trust Deed grants the Trustee only those rights and powers necessary to achieve the purposes of the Trust. The Trust Deed prohibits the Trust from engaging in any business or commercial activity or, subject to certain exceptions, investment activity and from using Trust assets to acquire oil and gas leases, royalties or other mineral interests.
The Trustee is entitled to be indemnified out of the assets of the Trust for any liability or loss arising in the performance of its duties except where the loss arises from its negligence, bad faith or fraud or for expenses incurred in the performance of its duties are his functions that go beyond the remuneration and remuneration to which he is entitled under the trust agreement.
sale of royalties; loans and reserves
With certain exceptions, the trustee may not sell all or any portion of the copyright unless authorized to do so by a vote of the holders of 60% of the outstanding interests. However, if the sale is to settle certain of the trust's obligations that are currently due and involves some but not all or substantially all of the trust's property, the sale need only be approved by a majority vote of the owners. of the units. Any sale of trust property must be for cash unless otherwise approved by unitholders. The Trustee is obligated to distribute to Unitholders the net proceeds available from such sale, having accrued the Trust's liabilities.
The Trustee has the power to borrow on behalf of the Trust or to sell the assets of the Trust to meet the liabilities of the Trust and to set aside a reserve to meet the liabilities without the consent of the Shareholders in the following circumstances:
The Trustee may borrow from a lender unaffiliated with the Trustee when available cash is insufficient to meet current liabilities and the Trustee has determined that it is impractical to meet such liabilities with funds that are expected to be available available in subsequent quarters, and in the absence of such B. a loan, the Trust's assets are at risk of loss or impairment. In order to ensure payment of its loans on behalf of the trust, the trustee has the power to encumber the trust's assets and segregate and pass on production payments. The loan must be on terms that (in the opinion of an investment bank or commercial bank selected by the Trustee) are commercially reasonable compared to other available alternatives. No distributions can be made to Shareholders until the Trust's loans have been fully repaid.
If the trustee is unable to borrow funds to pay the trust's liabilities, the trustee may sell the trust's assets if it determines that failure to pay the liabilities at a later date would be contrary to the best interests of unitholders and the sale cannot be submitted to the shareholders' vote. The sale must be for cash at a price at least equal to the fair market value (in the opinion of an investment bank or commercial bank selected by the Trustee) of the Shares being sold and on commercially reasonable terms compared to other available alternatives.
The Trustee has the right to establish a cash reserve for the payment of significant Trust liabilities which may become due if it determines that it is impractical to settle such liabilities with funds which are expected to be available in subsequent quarters and which are den In the absence of a reserve, the assets of the trust are at risk of loss or depreciation or the trustee is at risk of personal liability for such obligations.
In order for the trustee to borrow, sell assets to meet the liabilities of the trust, or create a reserve for the liabilities of the trust, the trustee must receive an unqualified written legal opinion that the proposed action will not adversely affect the trust's classification as a trust." grantor trust” for federal income tax purposes, or have the trust's income treated as unrelated taxable business income for federal income tax purposes. If the Trustee is unable to obtain the required legal opinion, it may nonetheless proceed with the loan or sale, or set up the reserve if it determines that failure to comply would result in material disadvantage to Shareholders as a whole.
The Trustee maintains a cash reserve of $1,000,000 to provide liquidity to the Trust during periods when the Trust is not receiving distributions from BP Alaska. See point 7 in Part II below.
irrevocability; Amendment of the Deed of Trust
The Deed of Trust and the Trust are irrevocable. No one has the authority to terminate, revoke or vary the Trust Deed except as described in the next paragraph and under “Termination of Trust” below.
The Trust Deed may be amended without the vote of Shareholders to eliminate ambiguity, to correct or amend any provision of the Trust Deed which may be inconsistent with any other provision, or to make other provisions in relation to any matter arising out of the Trust. Agreement that does not harm the participants. The Trust Deed may also be amended with the consent of the holders of a majority of the outstanding Shares. However, no change may alter the relative rights of the holders of Shares unless approved by the consent of the holders of 100% of the outstanding Shares, nor may any change reduce or delay distributions to the holders of the Shares or the number of shares in the trust, or make certain other changes unless approved by the consent of holders of at least 80% of the outstanding shares and the Trustee. The Trustee must agree to any amendment, which shall be approved by the required vote of Shareholders, unless the amendment affects the rights, duties and immunities of the Trustee under the Trust Deed. Amendments will not become effective until the Trustee has received a ruling from the Internal Revenue Service or an opinion from counsel that such amendment will not adversely affect the trust's classification as a grantor trust for tax purposes or give rise to federal income tax. The income of the trust is treated as independent business taxable income for federal income tax purposes.
termination of trust
The trust will terminate if (a) the holders of at least 60% of the outstanding units vote to dissolve the trust, or (b) the net royalty income for two consecutive years is less than $1,000,000 per year (unless that Net income during the biennium was materially and adversely affected by certain extraordinary events).
Upon termination of the trust, BP Alaska has the option to purchase the royalties at a price equal to the greater of: (i) the fair market value of the trust property as determined by an investment banking firm, commercial banking firm appraisal or any other entity authorized to provide an opinion as to the fair market value of the Trust Property, or (ii) the number of Shares outstanding multiplied by (a) the closing price of the Shares on the stock exchange at the date of termination of the Trust Property the Shares are listed, or (b) if the Shares are not listed on a stock exchange but are traded over the counter, the closing offer price on the date the Trust is wound up as listed on the NASDAQ stock exchange. The purchase must be made for cash unless the holders of 60% of the outstanding Shares authorize the sale for non-monetary consideration and the Trustee has received an order from the Internal Revenue Service or an opinion of a solicitor that such non-monetary consideration Consideration Provided The sale will not affect the Trust's classification as a grantor trust for federal income tax purposes or result in the Trust's income being treated as unrelated income taxable income for federal income tax purposes.
If BP Alaska does not exercise its option, the trustee will sell the trust assets on terms approved by a vote of the holders of 60% of the outstanding units, unless the trustee determines that it is not possible to resolve the matter bring vote. the holder of Shares and the sale will be at a price at least equal to the fair market value of the trust property as determined in the opinion of the investment bank, commercial bank or other entity referred to above and on such terms as that entity considers commercially reasonable become.
The Trustee will distribute any available income to Shareholders after having discharged all of the Trust's outstanding obligations and having set aside adequate reserves to pay contingent liabilities.
Shareholders shall have no right under the Trust Deed to require or secure any division or distribution of the royalty or other assets of the Trust or any accounting during the life of the Trust or during any liquidation and liquidation period.
Admin Resignation or Removal
The Trustee may resign or be removed, with or without cause, at any time by a vote of the holders of a majority of the outstanding Shares at a meeting convened and held in accordance with the Trust Deed. BP Alaska may appoint a successor trustee or, if the trustee is removed at a meeting of shareholders, the successor trustee may be appointed by the shareholders at the meeting. Any successor trustee must be a corporation organized under the laws of the United States, a state thereof, or the District of Columbia, conducting business and authorized to exercise fiduciary rights, or in any event, a national banking association incorporated in the United States. with combined capital, surplus and undivided proceeds of at least $50,000,000 and subject to federal or state regulation or review. Unless the trust already has a trustee that is a Delaware resident or principal place of business in Delaware, each subsequent trustee must be a Delaware resident or principal place of business in Delaware. The Trustee's resignation or removal will not be effective until a successor Trustee has accepted the appointment.
Shareholder Voting Rights
Shareholders have certain voting rights, but their voting rights are not comparable to those of shareholders in a corporation. For example, there is no need for annual shareholder meetings or regular elections of the trustee.
A meeting of Shareholders may be convened at any time to deal with any matter to which the Agreement authorizes the Shareholders. Such meeting may be convened by the Trustee in its sole discretion and shall be convened by the Trustee (i) as soon as practicable upon receipt of a written request from BP Alaska or a written request setting out in reasonable detail the proposed action to be taken at the Meeting and signed by holders of not less than 25% of the outstanding shares or (ii) as required by any applicable law or regulation or by the New York Stock Exchange. The Trustee must notify all holders of registered Shares at their addresses on file with the Trust at least 60 days before the meeting. All unit leader meetings must be held in Manhattan, New York City. Shareholders are entitled to one vote in respect of each Share held at the date of the minutes of the meeting on any matter brought before a meeting or by proxy.
royalties
The royalty is an Alaskan law property interest encumbering production, but there is no other security interest over the reserves or production proceeds associated with it. The royalty payable to the Trust for each calendar quarter is the sum of the amounts obtained by multiplying the royalty production for each day in the calendar quarter by the royalty per barrel for that day. Payment of royalty payments for any calendar quarter may not be less than zero or more than the value added of BP Alaska's total oil and condensate production work interest in the Prudhoe Bay Unit for the quarter, less the State of Alaska. royalties and less the value of any payments made to BP Alaska affiliates.
Royalty Production
"Royalty Production" for each day in a calendar quarter is 16.4246% of the lower of (i) the first 90,000 barrels of actual average daily net production of crude oil and condensate for the quarter from the Prudhoe Bay Reservoir (Permo-Triassic) and as of February 28, 1989, BP Alaska-owned oil and gas concessions in the Prudhoe Bay field (the "1989 Working Interests"), or (ii) actual average daily net oil production of crude oil and condensate for the 1989 workings royalty production is based on Oil produced from the oil tire and condensate from the gas cap, but not on gas production or natural gas liquids production. Working Interests actual average daily 1989 net oil and condensate production for any calendar quarter is total oil and condensate production for the quarter, less Alaska State duties, divided by the number of days in the quarter.
Royalties per barrel
The royalty per barrel for each day is the WTI price for the day less the sum of (i) eligible costs multiplied by the cost adjustment factor and (ii) production taxes.
WTI price
The “WTI Price” for each Dealing Day is (i) the price (in dollars per barrel) of standard grade West Texas Intermediate crude oil with a specific gravity of 40 degrees API for delivery to Cushing, Oklahoma (“West Texas Intermediate”) the quoted for that dealing day by The Wall Street Journal, Reuters or Platts Oilgram Price Report, in that order, publishes price quotes for West Texas Intermediate for the dealing day, or (ii) if the West Texas Price Intermediate is not published by any of those publications is the WTI Price is the simple average of average daily prices (in dollars per barrel) quoted for West Texas Intermediate by a major oil company, an oil broker and a certain oil trading company of BP Alaska, each unaffiliated with BP and having significant US operations, until published prices are available again. When West Texas Intermediate prices are not quoted to facilitate WTI price calculation, the price of "West Texas Intermediate" for purposes of WTI price calculation is the price of other standard domestic light sweet crude oil. Quality designated by BP Alaska and approved by the Trustee, with due allowance for transportation costs to the Gulf Coast (or other convenient location) to balance price with WTI price. The WTI price for each day that is not a trading day is the WTI price for the previous trading day.
chargeable costs
The "Recoverable Costs" per barrel of royalty production for each calendar year are fixed amounts disclosed in the Transfer and do not necessarily represent BP Alaska's actual production costs. The recoverable costs per barrel were $16.70 in 2012 and $16.80 in 2013 $16.90 in 2014, $17.00 in 2015 and $17.10 in 2016. The chargeable costs for 2017 and the following years are shown in the following table:
calendaryear and]chargeable costspro Barrel
2017 $17,20
2018 20.00
2019 23.75
2020 26.50
After 2020, chargeable costs will increase at a flat rate of $2.75 per barrel per year.
cost adjustment factor
The "cost adjustment factor" for a quarter is the ratio of the published consumer price index for the most recent month of February, May, August or November to 121.1 (the January 1989 consumer price index). “Consumer Price Index” means US consumer price index, all items and all urban consumers, US city average (1982-84 equals 100), first published, not seasonally adjusted, by the Bureau of Labor Statistics, Department of Labor, without regard to subsequent revisions or corrections . If the average WTI price for a calendar quarter falls to $18.00 or less, the cost adjustment factor for that quarter will be the cost adjustment factor for the immediately preceding quarter. If the average WTI price returns above $18.00 for a subsequent quarter, adjustments to the cost adjustment factor will resume, but with an adjustment to the formula that excludes changes in the consumer price index during the period in which adjustments to the cost adjustment factor were made, will be suspended . .
production taxes
"Production Taxes" are the sum of segregation taxes, excise taxes (including Windfall Tax, where applicable), sales taxes, value added taxes or other similar taxes or direct taxes on Reserves or the production, supply or sale of Royalty Production, calculated at established statutory rates.
On April 14, 2013, the Alaska Legislature passed an Oil Tax Reform Act amending the tax laws governing Alaska's oil and gas production, AS 43.55.10yes ss.(the “Production Tax Statutes”) for the purpose of promoting oil exploration and investment in the Alaskan oil industry. On May 21, 2013, the Governor of Alaska signed the Act into law as Chapter 10 of the Alaska Session Laws of 2013 (the "Act"). Among the significant changes, the law eliminated the monthly "progressiveness" tax rate introduced by certain amendments to production tax laws in 2006 and 2007, increased the base rate from 25% to 35%, and added a per-barrel tiered oil production tax credit. This tax credit is based on the gross value at production site per barrel of taxable oil and cannot reduce a producer's tax liability below the "minimum tax" (which is a percentage between zero and 4% of the gross point of the output value of a producer's taxable production during the calendar year, based on that). on the average price per barrel of crude oil from the North Slope of Alaska for sale on the West Coast of the United States for the year) under the Production Tax Statutes. These changes went into effect on January 1, 2014.
On January 15, 2014, the Trustee signed an agreement dated January 15, 2014 (the “2014 Agreement”) with BP Alaska relating to the implementation of the Act with respect to the Trust. Pursuant to the 2014 Letter of Agreement, the production taxes on the Trust's royalty production are the tax for the relevant quarter less the monthly tax credits allowed per barrel per barrel of royalty production for that quarter. Where there is a "minimum tax" limit on the amount of per barrel tiered tax credits that might otherwise be claimed for any quarter of the year, any difference between that provisional limit set on a quarterly basis and the actual limit for the full year will be accounted for is reflected in the payment to the Trust for Royalty Production for the first quarter of the following year.
On July 6, 2015, BP Alaska and the Trustee signed an agreement (the “2014 Agreement Amendment”) amending the 2014 Agreement to provide that if there is a “minimum tax” limitation on the amount of the per-barrel leader tax credit that might otherwise be claimed for any quarter during the year, any difference between this tentatively determined quarterly limit and the actual limit for the full year will be reflected in the payment to the Trust for quarterly payment of the quarter of royalty production for that year in lieu of payment to the Trust for the first quarter of royalty production the following year.
The 2014 Agreement Amendment Letter went into effect immediately. Therefore, for 2016, any difference between the provisionally determined limit for Q1-Q3 2016 and the actual limit for 2016 will be reflected in the payment to the Trust for Q4 2016 and not in the Payment to the Trust. for the first quarter of 2017.